GAO: Navy Pays Shipbuilders To Fix Construction Defects

WASHINGTON — The US Navy’s use of fixed-price incentive contracts came under fire today with the release of a new report claiming the service is paying shipbuilders a profit to correct construction mistakes made by the builders.

“The shipbuilder earns the same level of profit for correcting defects as it does for building the ship,” the Government Accountability Office (GAO) said in the report — despite guarantees in the contracts that should prevent that situation.

Even more, said GAO, “the award of follow-on, cost-reimbursement arrangements to correct remaining defects — under which the contractor also earns fee (profit) — creates an apparent disincentive for quality ship construction.”

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